Schafer: Main Street looks lonely, but Minnesota's farm country is doing just fine

Driving into Sherburn 35 years after graduating from its high school in southwest Minnesota, it was easy to remember where the physician's office was, long since closed.

I went by the grocery store on a Main Street corner, also long since closed.

The Chevy dealer is gone and the Dodge dealership is now an office of Baywood Home Care. Today just filling a prescription means a drive to the far bigger town of Fairmont, more than 15 miles down Interstate 90 to the east.

There's a great temptation to stand on Main Street and just sigh at all the obvious signs of decline.

Spend a day around Sherburn talking to people, however, and a far different story emerges. The disappearance of a thriving Main Street retail community in this town of about 1,100 doesn't begin to tell the complete economic story.

It's less a story about decline than it is about adapting to change. In fact, there's a case to be made that the community is doing quite well.

As of December the unemployment rate of 4.4 percent in the surrounding county was lower than the 4.7 percent for the state as a whole. The median household income of about $47,000 was only slightly lower than for Minneapolis, according to the U.S. Census Bureau.

I was in Sherburn at the invitation of Martin County West High School senior Rebecca Steen to talk at a National Honor Society ceremony, but a story was there to be told. Sherburn's in corn and soybean country about 150 miles southwest of the Twin Cities in Martin County, so it has to start with farming.

What's different about farming since 1979 starts with scale. My host for the day was Bob Roesler, a farm business management instructor, and he mentioned that a local farmer with a $10 million balance sheet is not uncommon.

For the past 26 years he's worked with family farmers, and he's lately been busy helping prepare detailed cash flow forecasts and other financial planning documents for the 50 or so he advises.

These are still small businesses, of course, but his farmers can't be mom and pops any longer, managing their businesses like their parents did with just a checkbook register. What it takes to really be good at the business in 2014 is about mastering financial management, too.

Roesler described a recent meeting with high school students who were themselves aspiring entrepreneurs, and they heard from a local farmer who had been invited to chat with them. This farmer's biggest surprise? The challenge of managing people.

Like business owners everywhere, he told the kids, he's found that he can't pay his best employees what they are really worth and that he can't get rid of the poorest performers fast enough.

No similar challenge existed 35 years ago, because then farmers like my father didn't have staff. If they were lucky, they had kids who could operate farm equipment without hurting themselves or tearing out the growing crops.

The ability to learn new skills and adapt to change isn't just about farm management, either. It's exactly what the managers of the tractor factory the next county over talked about as well.

Their plant is a principal manufacturing site for AGCO, a global manufacturer based in Georgia. The facility first opened in Jackson, just across the county line from Sherburn, back in the 1970s. That's when an entrepreneur named Al McQuinn started building self-propelled chemical applicators there.

With a local payroll now approaching 1,500, AGCO Jackson is nearly 10 times larger than it was in the early 1970s. In addition to being the manufacturing site for what's now AGCO's applicator product line, it also turns out Massey Ferguson row-crop tractors along with Challenger brand tractors.

These are big-ticket items. The smaller tractors rolling down the assembly line can sell for about $300,000 retail.

Eric Fisher, the director of operations, explained that his company has continued to invest in Jackson because of its local workforce. At least two-thirds of the staff, if not more, he said, have a personal experience with farm life. They know how a tractor gets used on a farm because they likely have driven one.

AGCO in Jackson is already so large that it can't just staff its line from the local community. Nearly 75 percent of the employees live within a radius of 30 miles, but it's not until you go out 60 miles that the total gets to 99 percent.

A key stop on the factory tour is the room Fisher called "assembly academy." AGCO's hiring strategy is to screen candidates for traits such as reliability and problem-solving, knowing that they may need to train for specific skills.

Jay Mulso, the tour guide through the AGCO factory and manager of the company's gleaming, not quite two-year-old customer welcome center, said no one really joins AGCO with the right skills to start welding on day one. The best new hires get up to speed quickly because they had experience working with their hands and with tools, much of it gained while growing up on nearby farms.

Mulso worried aloud, when walking through the fabrication plant, that as the farm economy continues to evolve with fewer farm families, finding applicants with that kind of background may get harder.

If there's any worry that surfaced during the day it's that one, that a shock to the farm economy could lead young people to abandon the area for opportunity elsewhere. For farm-country veterans like Roesler, it was the brutal farming recession of 1980s, known now simply as "the farm crisis," that fundamentally changed the area.

The population of the county only declined by about 7 percent that decade, to just under 23,000, but the net out-migration of people in their 20s accounted for the entire drop.

There isn't any reason to expect a similar farm crisis in the next few years. But after an extraordinarily good year in 2012 for farmers, the 2013 results that come out this week will likely show that farm incomes declined. It looks like 2014 is going to be worse. Both Deere & Co. and AGCO have been cautious in their near-term sales outlook for farm equipment.

In Martin County a slump in farm income also means there likely will be a decline in the cost of farmland, currently the most costly in the state, according to the U.S. Department of Agriculture. Last year cash rent there averaged $274 per acre.

Such price adjustments are slow to happen, suggesting at least a year or two of high costs with declining revenue, so there may be some financial pain for farmers.

The farmers should be far more resilient than those of my father's generation, as balance sheets are strong and borrowing costs remain near historical lows.

Lee Schafer came to the Star Tribune after 15 years as a corporate officer, consultant and investment banker in the Twin Cities. He has been a columnist for Twin Cities Business magazine and was senior editor for Corporate Report Minnesota. Follow @LeeASchafer